Bloomberg News

Malaysia’s Inflation Unexpectedly Quickens on Food, Transport

October 21, 2011

Oct. 21 (Bloomberg) -- Malaysia’s inflation unexpectedly quickened in September as food and transportation costs climbed and a weakening ringgit made imports costlier.

Consumer prices rose 3.4 percent from a year earlier after climbing 3.3 percent in August, according to a report by the Putrajaya-based statistics department today. The median estimate of 18 economists in a Bloomberg News survey was for a 3.3 percent increase.

Europe’s debt crisis and a faltering U.S. recovery have hurt demand for Asian goods, raising the danger to regional growth and prompting Asian central banks to refrain from raising interest rates or start to lower borrowing costs. The Malaysian government cut its forecast for economic expansion in 2011 this month and said there is “added pressure” to use fiscal resources to bolster growth.

“Domestic inflationary pressure is what’s keeping headline inflation elevated,” Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore, said before the report. “There are upside risks to inflation given that massive floods in neighboring countries such as Thailand will drive imported food prices to Malaysia higher.”

Thailand, the world’s largest rice exporter, may lose 6 million metric tons of unmilled rice as floods damage key plantation areas, Apichart Jongskul, secretary-general of the Office of Agricultural Economics, said today.

Malaysia’s ringgit fell about 7 percent against the dollar in September, along with most other Asian currencies, as a deepening European debt crisis prompted investors to shun emerging-market assets.

Bank Negara Malaysia left the overnight policy rate at 3 percent on Sept. 8 for a second meeting, saying a “more challenging” external environment has increased the “downside risks” to Malaysia’s economy. The nation will probably expand 5 percent to 5.5 percent this year, the government said Oct. 7, lower than an earlier target of as much as 6 percent.

Consumer prices will probably rise 3 percent to 3.5 percent in 2011, central bank Governor Zeti Akhtar Aziz said Sept. 25. The monetary authority will hold its final policy meeting this year on Nov. 11.

--Editors: Stephanie Phang, Cherian Thomas

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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